Friday 23 July 2010 13.23 EDT
First published on Friday 23 July 2010 13.23 EDT

Richard Desmond has clinched a deal to buy Channel Five for £103m, and has promised to spend more money in the television industry as he works to become a major player in the market.

As he closed in on the deal late this afternoon, the Express Newspapers owner led his board in a rendition of the Carpenters song We've Only Just Begun. Sources close to Desmond say that was a statement of intent, with further acquisitions to come.

"I'm delighted to have taken ownership of the network," Desmond said, "and I know with the right investment, drive and leadership it can go from strength to strength as a competitive broadcaster and a modern player for the digital viewer."

He is due to appear on Live From Studio Five, the channel's current affairs show, this evening to discuss the Five deal.Five, the UK's fifth-largest broadcaster, was launched in 1997 and was previously owned by RTL, the European broadcasting group. RTL announced its deal with Northern & Shell, the private company which controls Desmond's newspaper and magazine titles, to the stock market this evening.

Desmond's bid is believed to be twice what his closest rival offered for the company, which made an operating loss of €41m in the last financial year. It attracted interest, among others, from Channel 4 and the entrepreneur Jon De Mol, who created Big Brother.

Desmond had spent 10 days negotiating the details of the deal after being granted a period of exclusivity by RTL, and has also agreed to take on any regulatory risk that should arise. That means that if his acquisition is blocked by the media regulator Ofcom or by the Competition Commission, he will not get his money back. The deal is not expected to be blocked on competition grounds, however, because Desmond's combined share of the media market will remain relatively small.

Five has a 10% share of the TV advertising market and is by far the smallest of the UK's terrestrial channels.

Sources close to Ofcom have signalled they will also wave the deal through. Desmond has a broadcasters' licence because he broadcasts several adult pay-TV channels on the BSkyB satellite system.

Desmond has a reputation as an uncompromising dealmaker and may now try to renegotiate some of Five's deals with content suppliers, who include major American broadcasters and film studios. Some of those deals are believed to have been struck on unfavourable terms.

RTL contacted many of those suppliers over the past few days to ask them not to invoke change-of-control clauses that can be triggered by a sale. That would have required RTL to pay the full value of the contracts. The company is understood to have told suppliers that triggering the clauses would have led to legal disputes and delayed the Desmond deal.

He will be barred from directly promoting his magazines on Five under EU cross-promotion rules, but he will be free to use his publications to market Five's shows. .

Desmond's Channel Five might include a UK revival of Big Brother, which is in its final series on Channel 4. He has reportedly had direct discussions with Endemol about showing it. During an interview on his new TV channel, Desmond said: "We are talking to the Big Brother people, we're talking to the Coronation Street people, we're talking to Simon Cowell."

He told Live From Studio Five: "We've bought Channel Five because it's a great station, as you know as viewers. We're not messing about with the programming. All we're going to do is add more programmes and put extra money on screen." He named the channel's most popular shows, including CSI and Grey's Anatomy, and said they would all stay at Five. Asked if he planned to create programmes featuring Katie Price, one of the celebrities who regularly appear in his weekly magazine OK!, he said: "It might not be a bad idea, eh?"

He joked that he might also persuade "major international stars" like Tom Cruise and George Clooney to appear on Five. He also hinted that the "Five" name might be dropped, to be replaced by "Channel Five", its original title. "I like Channel Five, but you'll have to talk to the chief executive," he said.

Desmond, who highlighted the circulation growth of his newspapers and magazines, said his papers would soon feature eight-page promotional supplements about his new TV channel.

Under the terms of Five's terrestrial TV licence, which runs until 2014, it must screen a set amount of news and current affairs. Desmond has reassured Ofcom he will meet those requirements. Desmond, who is worth about £950m, is a controversial figure. He amassed much of his fortune from pornographic magazines, which he has now sold, and adult pay-TV channels. He bought Express Newspapers, whose titles include the Daily Express, its Sunday sister title and the Daily Star 10 years ago for £125m. His critics say he has failed to invest in the papers, cutting costs and axing or outsourcing jobs while taking tens of millions out of the business. Britain's fifth terrestrial channel, which launched with a blend of films, football and naughty, near-the-knuckle shows as it tried to carve a unique position, had 5% share of TV viewing in the UK last year. It is the home for popular imported shows such as Neighbours and Home and Away. Justin Lee Collins was poached from Channel 4 to become one of the faces of Five, but his two shows, Heads and Tails and Good Times, have both been axed.

Dawn Airey, its chair and chief executive, said: "Northern and Shell are an international media business with a prominent position in the UK. We move forward under the ownership of a successful media company that wants to grow our business and has exciting plans for the development of Five. We very much look forward to working with them."• To contact the MediaGuardian news desk email editor@mediatheguardian.com or phone 020 3353 3857. For all other inquiries please call the main Guardian switchboard on 020 3353 2000.

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